Oil Prices Slide as Demand Fears Outweigh Geopolitical Jitters
USOil Analysis
China's economic recovery is bumpy and recent data aggravated concerns, as Q2 GDP growth of 4.7% y/y was the slowest in more than a year, factory activity weakness persists, consumer spending is subdued and the real estate market remains in a perilous state. Authorities stepped up their efforts to support the economy with a series of rate cuts last week, but the newly-found urgency appears to have aggravated concerns.
China is the world's second largest economy and the biggest importer of oil, so its economic underperformance stokes fears over demand. In its latest monthly report, the International Energy Agency (IEA) found that the country's consumption contracted in April and May and expects global demand growth to decelerate sharply this year and the next, to average just below 1 million barrel per day. [1]
This pessimistic consumption outlook weighs on prices, as USOil has entered its fourth straight losing week. This makes it vulnerable to 72.40, although sustained weakness towards 67.69 has a higher degree of difficulty.
On the other hand, the near term supply-demand dynamics are less gloomy as a record travel season supports consumption and OPEC+ production curbs support the other side of the equilibrium. At the same time, the US bought nearly 5 million barrels for the Strategic Petroleum Reserve (SPR) [2]. Furthermore, China appears to be taking bolder action to support the economy, while the US Fed is getting closer to rate cuts. Geopolitical woes persist as Israel accused Hezbollah of a deadly attack in its soil with what was described as an "Iranian-made rocket" [3]. PM Netanyahu vowed to retaliate, crating risk for a wider conflict [4]. Markets also monitor the elections in Venezuela, a key oil producer and OPEC member, for the legitimacy of which the US expressed "serious concerns". [5]
On the technical front the RSI hovers around oversold levels and USOil may find the opportunity to rebound. The upside is unfriendly though and a strong catalyst would be needed for returning above the EMA200 (at around 80.00) that would pause the bearish bias and bring the July highs back in the spotlight.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 30 Jul 2024 https://www.iea.org/reports/oil-market-report-july-2024 | |
| Retrieved 30 Jul 2024 https://www.energy.gov/articles/biden-harris-administration-purchases-more-4-million-barrels-strategic-petroleum-reserve | |
| Retrieved 30 Jul 2024 https://x.com/IDF/status/1817610808844816517 | |
| Retrieved 30 Jul 2024 https://www.gov.il/en/pages/spoke-conversation270724 | |
| Retrieved 15 May 2026 https://www.state.gov/senior-administration-officials-on-the-venezuela-election/ |
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